Kyobo Securities has maintained its buy rating on Doosan Tesna (KOSPI: 131970) whilst cutting its target price sharply from 190,000 won to 135,000 won. Based on the stock's closing price of 76,300 won on 19th August, that implies upside of 76.9%.

Second-quarter results show improving profitability

Doosan Tesna reported revenues of 80.9bn won and operating profit of 9.9bn won for the second quarter (April–June), representing year-on-year revenue growth of 6.6% and a successful return to operating profitability, with an operating margin of 12.2%. This marks a meaningful improvement from the first quarter, when the company posted revenues of 76.8bn won and operating profit of 5.5bn won—a margin of just 7.1%.

Weakness in end-market demand for smartphones weighed on testing revenues from image sensors (CIS) and application processors (AP). However, solid growth in server controller and automotive semiconductor testing helped defend overall profitability.

A difficult 2025, with recovery expected from 2026

Looking at the annual trajectory, Doosan Tesna generated revenues of 373bn won and operating profit of 38bn won in 2024. The company is expected to experience a contraction in 2025, with revenues falling to 304bn won and a small operating loss of 900m won. A recovery is then projected for 2026, with revenues of 347.1bn won (up 14.2% year-on-year) and operating profit of 42.3bn won, implying a 12.2% margin. That said, 2026 profit would only marginally exceed 2024's level—hardly a ringing endorsement of rapid recovery.

Sentiment, not fundamentals, drove the target price cut

Kyobo's analysts are explicit that the target price reduction reflects a shift in market sentiment rather than a downgrade to earnings forecasts. The brokerage notes that investor attention has rotated towards memory semiconductor supply chains—buoyed by AI-related demand—at the expense of non-memory testing specialists, whose near-term growth is seen as more limited. Doosan Tesna's shares have fallen around 60% from their 52-week high of 190,100 won, though they remain more than double the 52-week low of 34,100 won.

Ambitious medium-term targets hinge on new growth drivers

Despite the near-term headwinds, Kyobo's medium-term outlook is considerably more optimistic. The brokerage projects revenues of 496.8bn won (up 43.1% year-on-year) and operating profit of 114bn won (a 23.0% margin) for 2027—a dramatic step-up from current levels.

Three catalysts underpin this scenario. First, testing revenues from advanced AI-oriented system-on-chip (SoC) products are expected to begin contributing from the fourth quarter of this year. Second, CIS testing volumes are forecast to scale up meaningfully from the second quarter of 2027. Third, the company is expected to expand its footprint in next-generation automotive semiconductor testing, a segment in which Doosan Tesna already holds exclusive "first vendor" status for current-generation products—a position it is likely to retain.

Valuation methodology and its caveats

The 135,000 won target price is derived by applying a price-to-earnings multiple of 28 times—the average 2027 forward PER of global OSAT (outsourced semiconductor assembly and test) peers—to Doosan Tesna's estimated 2027 earnings per share of 4,829 won. Investors should note, however, that this valuation rests entirely on the assumption that the company's 2027 earnings materialise as projected.

Key risks remain

Several risks warrant caution. Weakness in consumer electronics-related testing revenues persisted into the second quarter and may prove stubborn. The broader market preference for memory over non-memory semiconductor supply chains is unlikely to reverse quickly. Most importantly, the actual revenue contribution from high-value new products—AI SoCs and CIS—remains unconfirmed; Kyobo's own analysts acknowledge that "the scale of revenues from these segments is difficult to predict at this stage."

The central question for investors, then, is the gap between the visibility of Doosan Tesna's long-term growth story and the timing of a meaningful market re-rating. Kyobo argues that as second-half results improve and clearer guidance for 2027 emerges, the company's valuation could converge towards that of global peers. For now, how steeply investors choose to discount growth that has yet to materialise will be the defining factor in how they assess the stock.